Since about 1990, and particularly during the past decade, humans have dramatically augmented our Physical World with a Digital World. Like other things we do that are unique to our species, building a Digital World of commerce, entertainment, and other uses is quite a strange evolutionary step to take.

This evolutionary shift has not been gradual. Rather, the Digital World has punctuated our reality rapidly and intensely. This has, in turn, disrupted every walk of life, creating a spectrum of new threats and opportunities that span the realms of innovation, business, regulation, and society. And whether you’re prepared or not, the “new rules of the Digital World” are being written right now. 

Digital software, platforms, tools, and apps have rapidly changed the nature and scope of how people consume, businesses operate, and governments regulate. The transformation of business environments into digital ecosystems – increasingly automated, networked, data-driven, and competitive – is disrupting and restructuring entire industries. In a business landscape where data and digital technologies are powering a new industrial revolution, the most successful contemporary leaders need to understand both the Physical World and the Digital World.

Companies rooted in the Physical World control resources such as energy (oil, sunlight, water), territory (land, air, sea), currency (gold, diamonds), information (printing press, news media), and governance (nation-states, intergovernmental bodies). Rulers of the Physical World traditionally held vast sway over such “natural resources” and thus influence over society’s norms and institutions.  

Today, in a world where access to data powers digital software, platforms, tools, and apps, plus leaders’ decision-making, individual companies and entire industries are conducting more and more of their business in the Digital World. While companies rooted in the Physical World are certainly still important, those rooted in the Digital World have gained tremendous monetary value and influence over society’s norms and institutions during the past 30 years.

This report from our new series THE SHIFT gives an overview of the new rules of innovation, economics, and regulation of the Digital World, including new threats and opportunities facing the power players operating in it.